The June CPI slowed 1.6% and surprised the market. Although the transfer of the exchange rate at prices was lower than in previous episodes, analysts warn that, if the dollar trend persists, an impact is not ruled out.
June inflation was 1.6% and was below market expectationsaccording to the National Institute of Statistics and Census (INDEC). The data was known in a context in which, towards the end of that month, the dollar began to show signs of instability that They intensified during the first two weeks of July. The question that inevitably arises is: can this volatility of the exchange rate impact prices?
The first answer is no -That less not in the same magnitude as in previous episodes-, since there are various factors that are functioning as shock absorbers. Between June 18 and July 14, the official exchange rate rose 10%. However, according to private estimates, That movement did not have a significant effect on food prices. The weekly survey of the LCG consultancy indicated that, in the first week of July, the food item rose 0.7%, while in the second week the increase was decelerated to 0.3%. Similar behavior reflected the Analytica consultancy report.
This phenomenon marks an encouraging fact: the “pass This” -That is, the degree of transfer of the dollar rise at prices- was considerably less than observed in exchange volatility situations Previous, compared for example to the devaluation of Axel Kicillof in 2004, Mauricio Macri in 2016 and Sergio Massa, at the end of 2023.
Rise from the dollar and “pass through” less than in the past: what factors explain it
According to an Adcap Financial Group report, the transfer of the exchange rate to prices was “weaker and more moderate.” Economist Federico Filippini attributed this phenomenon to three main factors:
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Anchored expectationssustained by the Fiscal Front.
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Weakened disindexationdue to the government’s refusal to validate real wage increases and the disarmament of automatic adjustment mechanisms.
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Economic weaknesswhich limits the capacity of companies to transfer cost increases in the face of a delayed demand and higher levels of unemployment.
Claudio Capraulo, director of Analyticahe said: “The devaluation of April realized that the transfer at the prices of the dollar rise fell. Yes an acceleration in imported wholesale prices was noted, but did not move to retailers. We are not seeing in our measurements a consumer price rise during the last weeks with the acceleration of the official dollar. The causes are multiple, but a greater competition is highlighted as a result of the opening of imports, lower levels of production in the local manufacturing industry, consumption relegated in some areas and expectations about the dollar still contained inside the exchange band. “
Inflation Prices Consumption
Mariano Fuchila
What could happen if the volatility of the dollar continues?
According to Florencia Iragui, analyst at the LCG consultancy“Consumption may act as an anchor. If the amounts do not increase enough, the seller will seek to win by volume. On the other hand, if the retail sector managed to rebuild margins in the past, it can face increases by wholesalers.” However, he warned that “yes This volatility is consolidated, we could expect that at least a certain part be transferred to prices. ”
Along the same lines, Hernán Letcher, director of the Center for Argentine Political Economy (CEPA), added a key look by pointing out that, for the first time from the departure of the stocks, the exchange rate exceeded the threshold it had reached after the exchange unification. In that sense, he explained: “If I set prices, I made the ‘Price Setting’ of my products. What dollar? Well, suppose I did it to the maximum dollar of the exit of the exchange unification. Well, until the end of June that value had not been overcome. Therefore, it is reasonable to think that I would not have gone to inflation. I do not know if the same can be said in July. Ascending curve, effect on prices you will have. “
This effect could begin to manifest, although with an intensity less than in episodes of jumps of the most abrupt dollar. It is a factor to follow closely in the second semester, in a context where Inflation and legislative electoral calendar will play a central role.
Source: Ambito
